Income Disclosure Scheme 2.0 another chance for Tax Evaders – Everything you must know
After bringing in de-monetisation, the Govt. has now given second opportunity to the people with black money to come out clean without facing the axe of the Income Tax Deptt.
Ques: What is the new scheme that the Govt. has come out with?
Ans: The new scheme of the Govt. is called the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana’ 2016
Ques: What are the provisions of the scheme relating to Taxation of undisclosed income or black money?
Ans: The provisions relating to taxation of undisclosed income on declaration under the scheme will be as follows:
If the declaration is made voluntarily
Any income declared under this scheme will attract tax @30% plus 33% surcharge on the amount of tax known as Pradhan Mantri Garib Kalyan Cess plus penalty equal to 10% of undisclosed income. This amounts to a total of 49.9% of undisclosed income which will have to be paid before filing declaration under the scheme.
Ques: Does it mean that if 50% of the undisclosed income is paid as tax. The other 50% becomes clean and is available for use by the declarant?
Ans: After the declarant has paid 49.9% as tax on undisclosed income, it means that the other 50% becomes clean/legitimate income of the declarant.
However, the declarant will not be able to withdraw the whole of other 50% amount of undisclosed income.
The declarant will have to deposit 25% of the undisclosed income in the Pradhan Mantri Garib Kalyan Deposit Scheme’2016. This deposit will be locked in for a period 4 years from the date of deposit. Also, this deposit will not carry any interest.
This means that on declaration under the new scheme only 25% of the undisclosed income will be available for withdrawal and use of the declarant.
Ques: Will the Income declared under the scheme be included in the total income of the declarant for the current assessment year or any other assessment year?
Ans: No, any amount declared under the scheme is separate income of the assessee. The income declared under the scheme will not be included in the total income of the declarant for any assessment year. Income declared under this scheme will be taxed separately as per the provisions of the scheme.
Ques: Will any deduction be allowed for the income declared under the scheme?
Ans: No deduction in respect of any expense, set-off of any loss or allowance shall be allowed against the income declared under the scheme. This means that the entire income declared under the scheme will be subject to tax @ 49.9%.
Ques: In case of Companies, Firms etc. Who shall make the declration?
Ans: The declaration shall be made by the person specified under section 140 of the Income Tax Act’1961.
Ques: Whether tax, surcharge, penalty and deposit of 25% in the scheme shall be made before the declaration is made?
Ans: Yes, the Tax, surcharge and penalty shall be paid before making declaration under this scheme. Also, the deposit of 25% u/s 199F to be locked in under the Pradhan Mantri Deposit Scheme’2016 shall also be deposited before making the declaration under scheme.
Further, the declaration shall accompanied by a proof of deposit of Tax, surcharge etc.
Ques: Can I get refund of Tax, Surcharge and penalty paid under the scheme?
Ans: Tax, Surcharge and penalty paid shall not refundable under any circumstances.
Ques: Whether the declaration can be of income in the form of cash only?
Ans: As per section 199C, any person may make a declaration in respect of any income, in the form of cash or deposit in an account maintained by the person with any banking company or post office or RBI on or before 01.04.2017.
Ques: What happens if a person makes a false declaration under scheme?
Ans: If a declaration is made by suppression or misrepresentation of facts or without payment of tax, surcharge etc., such declaration shall be void.
Ques: My assessments for previous years have been completed. Now I am making a declaration in the scheme. Will the declaration affect any of my completed assessments?
Ans: Any undisclosed income under scheme shall be taxed separately as per the scheme. The declaration shall not affect the finality of any completed assessments in the past.
Ques: What will happen if a person who has black money does not make a declaration under the scheme?
Ans: If a person who has black money does not make a declaration under the scheme shall be subject to a very high rate of tax whenever he is caught by the Income Tax Deptt. For this purpose, suitable amendments have been made under the Income Tax Act’1961
Section 115 BBE of the Income Tax Act, has been amended to tax persons who fail to make a declaration under the new scheme.
The persons who do not make a declaration under scheme if caught will be subject to a higher rate of tax of 60% of the Undisclosed Income.
Also, in addition to this the assessee will be subject to a surcharge of 25% on the amount of Tax (i.e 25% of 60%= 15%)
Also, a new section 271AAC has been inserted under Income Tax Act’ 1961, to levy a penalty of 10% on the tax payable i.e a penalty of 6% (10% of 60%) will be levied if a person is caught.
The total tax burden of the person caught by the Income Tax deptt. who fails to make a declaration under the scheme shall be atleast 81% of the Total undisclosed Income i.e 60%+15%+6%= 81%.
Ques: Can anybody apply for declaration under the scheme?
Ans: All persons having undisclosed income can apply in the scheme. However, the scheme does not apply to the following persons:
The scheme does not apply to any undisclosed foreign income and foreign assets which is chargeable to tax under Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act’ 2015.
In respect of any person on whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of smuggling Activities Act’1974.
Any person notified under section 3 of the Special Court (Trial of offences Relating to transactions in Securities) Act’1992.
The scheme does not apply to prosecution of offence punishable under Prevention of money laundering Act, Prohibition of Benami Property Transactions Act’1988, The Unlawful Activities (Prevention) Act, 1967, The Prevention of Corruption Act’1988, Certain offences under the Indian Penal Code.
Ques: To whom is the declaration under the scheme to made?
Ans: The declaration under the scheme shall be made to the Prinicipal Commisioner or the Commissioner notified in the Official Gazette for this purpose.
Ques: What is the purpose of the Scheme?
Ans: The amount collected from the scheme is proposed to be utilised for the schemes of irrigation, housing, toilets, primary health, primary education, infrastructure etc. so that the money of the Black money hoarders can be used for the welfare of the poor so that there is justice and equality.